TIDMTXP
RNS Number : 0965U
Touchstone Exploration Inc.
27 March 2019
YEAR- 2018 RESULTS
Extensive operational program drives strong financial
performance
Calgary, Alberta - March 27, 2019 - Touchstone Exploration Inc.
("Touchstone" or the "Company") (TSX / LSE: TXP) announces its
financial and operating results for the three months and year ended
December 31, 2018. Selected financial and operational information
is outlined below and should be read in conjunction with
Touchstone's December 31, 2018 audited consolidated financial
statements, the related Management's discussion and analysis and
the Annual Information Form, all of which will be available under
the Company's profile on SEDAR (www.sedar.com) and the Company's
website (www.touchstoneexploration.com). Unless otherwise stated,
tabular amounts herein are in thousands of Canadian dollars, and
amounts in text are rounded to thousands of Canadian dollars.
Paul Baay, President and Chief Executive Officer, commented:
"I am pleased to announce that we have delivered a substantial
increase in all key performance indicators in 2018, which was a
direct result of the hard work and determination demonstrated by
our team during a busy operational period. Touchstone became the
most active onshore upstream company in Trinidad, as we expanded
our original drilling program and hit our initial production
milestone of 2,000 bbls/d. We also displayed financial and
operational discipline during 2018, allowing us to achieve a 53%
annual increase in operating netback."
"Following the GBP3.8 million private placement post year-end,
Touchstone is funded to commence drilling the first exploration
well on our Ortoire block where there is a significant opportunity
to achieve a step-change in future reserves and production. We will
take a measured approach to our 2019 capital drilling program as we
focus on our exploration opportunities."
Highlights
-- Achieved annual average crude oil production of 1,718 barrels
per day ("bbls/d"), a 25% increase relative to the average 1,375
bbls/d produced in 2017.
-- Executed a $19,064,000 development program to drill 11
successful wells, complete nine wells, and perform 28 well
recompletions.
-- Increased petroleum sales 53% from the prior year, generating
$48,933,000 versus $32,020,000 in 2017.
-- Realized an operating netback of $34.58 per barrel, an
increase of 53% from the $22.56 per barrel generated in 2017.
-- Reduced per barrel operating costs by 4% and general and
administrative expenses by 3% from the prior year.
-- Generated funds flow from operations of $10,797,000 ($0.08
per share) compared to $3,110,000 ($0.03 per share) realized in
2017.
-- Recognized net earnings of $480,000 ($0.00 per share)
compared to a net loss of $947,000 ($0.01 per share) reported in
2017.
-- Exited the year with cash of $4,845,000 (which excluded 2018
crude oil sales of $6,014,000 collected subsequent to year-end) and
net debt of $19,527,000, representing 1.8 times net debt to annual
2018 funds flow from operations.
-- Subsequent to year-end, we issued 31,666,667 common shares
raising gross proceeds of $6,615,000 to primarily fund an
exploration well on our Ortoire block, which is expected to spud in
June 2019.
Financial and Operating Results Summary
Three months ended % change Year ended December % change
December 31, 31,
------------- ---------
2018 2017 2018 2017
-------------- ---------------------- ---------------------- ------------- ---------------------- ----------------------- ---------
Operating
highlights
Average daily
oil
production
(bbls/d) 1,851 1,448 28 1,718 1,375 25
Net wells
drilled 3 - - 11 4 175
Net wells
recompleted 7 7 - 28 20 40
Brent
benchmark
price
(US$/bbl) 68.76 61.45 12 71.31 54.17 32
Operating
netback(1)
($/bbl)
Realized
sales price 77.21 69.88 10 78.02 63.79 22
Royalties (19.49) (20.16) (3) (20.92) (17.89) 17
Operating
expenses (28.02) (27.58) 2 (22.52) (23.34) (4)
-------------- ---------------------- ---------------------- ------------- ---------------------- ----------------------- ---------
29.70 22.14 34 34.58 22.56 53
-------------- ---------------------- ---------------------- ------------- ---------------------- ----------------------- ---------
Financial
highlights
($000's except share and per
share amounts)
Petroleum
sales 13,151 9,308 41 48,933 32,020 53
Cash provided
by operating
activities 2,228 2,310 (4) 8,367 704 1,088
Funds flow
from
operations 1,678 892 88 10,797 3,110 247
Per share -
basic
and
diluted(1) 0.01 0.01 - 0.08 0.03 167
Net earnings
(loss) 780 3,653 (79) 480 (947) n/a
Per share -
basic
and diluted 0.01 0.03 (67) 0.00 (0.01) n/a
Capital
expenditures
Exploration 2,147 330 551 3,387 1,240 173
Development 6,380 763 736 19,064 8,138 134
-------------- ---------------------- ---------------------- ------------- ---------------------- ----------------------- ---------
8,527 1,093 680 22,451 9,378 139
-------------- ---------------------- ---------------------- ------------- ---------------------- ----------------------- ---------
Net debt(1) -
end
of period
Working
capital
deficit
(surplus) 4,527 (6,808)
Principal long-term balance
of loan 15,000 15,000
19,527 8,192 138
-------------- ---------------------- ---------------------- ------------- ---------------------- ----------------------- ---------
Weighted average shares outstanding
(000's)
Basic 129,021 105,955 22 129,021 94,204 37
Diluted 130,532 106,542 23 130,220 94,204 38
Outstanding shares - end of
period (000's) 129,021 129,021 -
Note:
(1) Non-GAAP financial measure that does not have a standardized
meaning prescribed by International Financial Reporting Standards
("IFRS") and therefore may not be comparable with the calculation
of similar measures presented by other companies. See "Advisories:
Non-GAAP Measures" for further information.
Operating Results
Touchstone was the most active onshore upstream company in
Trinidad in 2018, drilling a total of 11 developmental oil wells,
nine of which were completed and on production prior to the end of
the year. 2018 development capital expenditures totaled
$19,064,000, which included drilling and completion activities and
the recompletion of 28 wells. Fourth quarter 2018 development field
activity included drilling three crude oil development wells,
completing one of these wells and recompleting seven legacy wells
with a total capital spend of $6,380,000. The remaining two wells
of the 2018 drilling program were completed subsequent to
year-end.
Fourth quarter 2018 crude oil production averaged 1,851 bbls/d,
a 28% increase relative to the 1,448 bbls/d produced in the fourth
quarter of 2017. Fourth quarter average daily production increased
5% from the third quarter of 2018, with growth slowed by multiple
wells requiring lengthy workovers. Annual 2018 production averaged
1,718 bbls/d, representing a 25% increase from the 1,375 bbls/d
average produced in the prior year. The nine wells drilled and
completed in 2018 combined to add an average of 342 bbls/d and 198
bbls/d of incremental production in the fourth quarter and the
year, respectively. In addition, the four wells drilled in 2017
continued to perform ahead of internal expectations, contributing
an average of 354 bbls/d in the fourth quarter of 2018 and 343
bbls/d throughout 2018.
Exploration expenditures were mainly focused on our Ortoire
property, as we invested $2,147,000 and $3,387,000 during the three
months and year ended December 31, 2018, respectively (2017 -
$330,000 and $1,240,000). We continue to focus on advancing our
internally identified exploration prospects on the property in
order to complete our four well drilling obligations in 2019 and
2020. The Company has submitted four Certificate of Environmental
Compliance ("CEC") applications which are required prior to the
preparation of drilling locations. Two CECs covering seven drilling
locations have been approved by regulatory authorities to date.
Financial Results
Our fourth quarter operating netback was $5,059,000 ($29.70 per
barrel), an improvement of 71% compared to $2,950,000 ($22.14 per
barrel) recorded in the fourth quarter of 2017. A 10% increase in
realized prices and a 28% increase in crude oil production resulted
in a $3,843,000 increase in petroleum sales relative to the fourth
quarter of 2017. This was offset by higher royalties of $634,000
from increased production and the sliding scale effect of increased
commodity pricing to royalty rates, slightly offset by new well
production that qualified for royalty incentives. 2018 fourth
quarter operating costs increased by $1,100,000 from the prior year
comparative quarter based on non-recurring lease expense
adjustments of $528,000, elevated variable costs from increased
production and increased well servicing costs.
Operating netback was $34.58 per barrel in 2018, a 53% increase
from $22.56 per barrel recognized in 2017. Realized pricing for
crude oil averaged $78.02 (US$60.01) per barrel in 2018 versus
$63.79 (US$49.18) per barrel received in 2017. Relative to 2017,
Petroleum sales increased 53% to $48,933,000 based on a 22% annual
increase in realized crude oil prices and a 25% increase in
production volumes. Royalty expenses represented 26.8% of petroleum
sales during the year ended December 31, 2018 versus 28.1% in the
prior year. The decrease was a result of incremental production
achieved from our 2018 drilling program which qualified for royalty
incentives. Despite the aforementioned $528,000 one-time charge,
annual operating costs decreased 4% on a per barrel basis, which
was primarily attributable to increased production.
During the three months and year ended December 31, 2018,
Touchstone generated funds flow from operations of $1,678,000 and
$10,797,000, representing increases of $786,000 and $7,687,000 from
the prior year comparative periods, respectively. The variances
were mainly a result of elevated operating netbacks based on
increases in both production and realized pricing. In addition to
the $528,000 operating cost adjustment, the Company incurred a
non-recurring $620,000 general and administrative charge related to
the restoration of legacy office leases that expire on March 31,
2019.
Earnings before income taxes for the year were $11,866,000,
representing an increase of 113% from the $5,579,000 recorded in
2017. The increased operational financial performance achieved in
2018 was slightly offset by decreased property and equipment
impairment recoveries reported in the year, as $4,335,000 and
$7,851,000 in net impairment recoveries were recorded during the
2018 and 2017 fiscal years respectively. $2,437,000 in current
taxes were reported throughout 2018 versus $440,000 in 2017, mainly
due to increased supplemental petroleum taxes based on increased
realized prices received in 2018. 2018 deferred taxes increased
$2,863,000 from the $6,086,000 recorded in 2017 based on increased
capital activity performed in the year. After current and deferred
taxes, we recorded net earnings of $480,000 during the year ended
December 31, 2018 compared to a net loss of $947,000 in 2017.
Touchstone exited the year with a cash balance of $4,845,000, a
working capital deficit of $4,527,000 and a $15 million principal
term loan balance. Our cash and working capital balances decreased
from December 31, 2017 based on the capital-intensive nature of the
Company's development activities. The investments increased both
production and funds flow from operations from the prior year, as
net debt to trailing twelve-month funds flow from operations was
1.8 times as of December 31, 2018 versus 2.6 times as at December
31, 2017. Touchstone's $15 million credit facility does not require
the commencement of principal payments until January 1, 2020, and
the Company was well within the financial covenants as at December
31, 2018.
Subsequent to year-end, we raised gross proceeds of GBP3,800,000
($6,615,000) by way of a placing of 31,666,667 new common shares at
a price of 12 pence ($0.21) per common share. We intend to use the
net proceeds from the private placement to fund the first
exploration well on our Ortoire property. Touchstone will carefully
monitor commodity pricing volatility and will continue to take a
measured approach to our 2019 capital drilling program in an effort
to manage working capital and reduce net debt levels.
For Further Information:
Touchstone Exploration Inc.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. Scott Budau, Chief Financial Officer
Mr. James Shipka, Chief Operating Officer
www.touchstoneexploration.com
Shore Capital (Nominated Advisor and Joint Broker)
Nominated Advisor: Edward Mansfield / Mark Percy / Daniel Bush
Tel: +44 (0) 207 408 4090
Corporate Broking: Jerry Keen
GMP FirstEnergy (Joint Broker)
Jonathan Wright / Hugh Sanderson Tel: +44 (0) 207 448 0200
Camarco (Financial PR)
Nick Hennis / Jane Glover / Billy Clegg Tel: +44 (0) 203 757
4980
About Touchstone
Touchstone Exploration Inc. is a Calgary based company engaged
in the business of acquiring interests in petroleum and natural gas
rights, and the exploration, development, production and sale of
petroleum and natural gas. Touchstone is currently active in
onshore properties located in the Republic of Trinidad and Tobago.
The Company's common shares are traded on the Toronto Stock
Exchange and the AIM market of the London Stock Exchange under the
symbol "TXP".
Advisories
Non-GAAP Measures
This announcement contains terms commonly used in the oil and
natural gas industry, including funds flow from operations per
share, operating netback and net debt. These terms do not have a
standardized meaning under IFRS and may not be comparable to
similar measures presented by other companies. Shareholders and
investors are cautioned that these measures should not be construed
as alternatives to cash provided by operating activities, net
income, total liabilities, or other measures of financial
performance as determined in accordance with Generally Accepted
Accounting Principles. Management uses these Non-GAAP measures for
its own performance measurement and to provide stakeholders with
measures to compare the Company's operations over time.
The Company calculates funds flow from operations per share by
dividing funds flow from operations by the weighted average number
of common shares outstanding during the applicable period. Funds
flow from operations is an additional subtotal found on the
Company's consolidated statements of cash flows.
The Company uses operating netback as a key performance
indicator of field results. Operating netback is presented on a
total and per barrel basis and is calculated by deducting royalties
and operating expenses from petroleum sales. If applicable, the
Company also discloses operating netback both prior to realized
gains or losses on derivatives and after the impacts of derivatives
are included. Realized gains or losses represent the portion of
risk management contracts that have settled in cash during the
period, and disclosing this impact provides Management and
investors with transparent measures that reflect how the Company's
risk management program can impact netback metrics. The Company
considers operating netback to be a key measure as it demonstrates
Touchstone's profitability relative to current commodity prices.
This measurement assists Management and investors with evaluating
operating results on a historical basis.
The Company closely monitors its capital structure with a goal
of maintaining a strong financial position in order to fund current
operations and the future growth of the Company. The Company
monitors working capital and net debt as part of its capital
structure to assess its true debt and liquidity position and to
manage capital and liquidity risk. Working capital is calculated as
current assets minus current liabilities as they appear on the
Company's consolidated statements of financial position. Net debt
is calculated by summing the Company's working capital and the
principal (undiscounted) amount of long-term debt.
Forward-Looking Statements
Certain information provided in this announcement may constitute
forward-looking statements within the meaning of applicable
securities laws. Forward-looking information in this announcement
may include, but is not limited to, statements relating the
potential undertaking, timing, locations, production rates and
costs of future well drilling, completion and exploration
activities, and the sufficiency of resources and available
financing to fund future exploration, drilling and completion
operations. Although the Company believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because the Company can give no
assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. Certain of these risks are
set out in more detail in the Company's December 31, 2018 Annual
Information Form dated March 26, 2019 which has been filed on SEDAR
and can be accessed at www.sedar.com. The forward-looking
statements contained in this announcement are made as of the date
hereof, and except as may be required by applicable securities
laws, the Company assumes no obligation to update publicly or
revise any forward-looking statements made herein or otherwise,
whether as a result of new information, future events or
otherwise.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR JFMLTMBTTBAL
(END) Dow Jones Newswires
March 27, 2019 03:00 ET (07:00 GMT)
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